Altruistic parents have a reason to care about their children’s preferences for work because if the
grown-up children suffer from economic hardship, the parents will want to help them. The
stronger the work norms of the children, the less will the parents have to help them. Altruistic
parents have, therefore, an economic reason to instill strong work norms in their children.
However, if the welfare state takes over the obligation to help children who happen to suffer
economic hardships, the parents have less incentive to instill work norms in their children.
Lindbeck and Nyberg develop a theory that formalizes these intuitions. Interestingly, data from
the World Values Survey in 1998 are consistent with their account. The seven countries that rank
lowest in terms of the share of respondents who consider a willingness to work hard important to
learn at home are advanced European welfare states. Denmark, where only 2 percent of the
respondents hold this view, ranks last out of 42 countries, followed by Sweden, Finland,
Norway, the Netherlands, Austria, and West Germany.11
4. Conclusion
Over two decades ago, when economists were laying the groundwork for an economics in which
information was endogenous, Stiglitz (1985) argued that the standard theory “is not robust to
slight alterations in the informational assumptions. It is but a special—and not very plausible—
‘example’ among the possible set of informational assumptions which can be employed to
characterise an economy” (p. 21). Here we have suggested that the assumption of exogenous
preferences—unaffected by the outcomes in society—is but a special and not very plausible
example among the possible set of assumptions about preferences that can be employed in
explaining economic outcomes.
A considerable body of research suggests that institutions may have effects that go far
beyond the incentives that they provide - they may create framing and priming effects that
influence the accessibility of memories and the perception, interpretation and, hence, the
meaning of facts. It is possible that exposure to certain institutions and environments influences
whether in a figure such as Figure 2, some societies have the ability to see that the two lines are
11 Another interesting paper on the importance of endogenous preferences is Doepke and Zilibotti (2008). They
develop a theory of preference formation that is a key component in explaining the reversal of fortunes between the
landowners and the emerging bourgeoisie at the outset of the industrial revolution. In their approach, economic
incentives induce parents to instill particular preferences in their children (e.g. a strong work ethic and a low
discount rate in the case of the middle classes at the outset of the industrial revolution); these preferences in turn
have important effects on economic development and social stratification.
17